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EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated
as of July 20, 2000 among Level 8 Systems, Inc., a Delaware corporation (the
"Company"), and the various purchasers identified and listed on Schedule I
hereto (each referred to herein as a "Purchaser" and, collectively, the
"Purchasers.")
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 under Regulation D as promulgated by the
United States Securities and Exchange Commission (the "Commission") under
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire from the Company, 30,000 shares of the Company's
Series B 4% Convertible Preferred Stock, par value $0.001 per share, liquidation
value $1,000 per share (the "Preferred Stock") at an aggregate purchase price of
$30,000,000 in the form of Exhibit A annexed hereto, and a stock purchase
warrant or warrants (each, a "Warrant"), in the form of Exhibit B annexed
hereto, to purchase an aggregate amount of 1,047,382 shares of the Company's
common stock, par value $0.001 per share (the "Common Stock");
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws; and
NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Purchasers hereby
agree as follows:
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ARTICLE I.
PURCHASE AND SALE
1.1 Purchase and Sale.
On the Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and sell to each
Purchaser and each Purchaser, severally and not jointly, shall purchase from the
Company the shares of Preferred Stock as set forth on Schedule I and a Warrant
or Warrants exercisable for the amount of Common Stock as set forth on Schedule
I for such Purchaser. The aggregate purchase price of the shares of Preferred
Stock purchased by the Purchasers shall be $30,000,000 and the aggregate number
of shares of Common Stock for which the Warrant or Warrants will be exercisable
shall be 1,047,382 shares of Common Stock.
1.2 Closing.
The Closing. The closing of the purchase and sale of the
30,000 shares of Preferred Stock and Warrants for an aggregate of 1,047,382
shares of Common Stock (the "Closing") shall take place at the offices of Akin,
Gump, Strauss, Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, or by transmission by facsimile and overnight courier, immediately
following the execution hereof or such later date or different location as the
parties shall agree, but not prior to the date that the conditions set forth in
Section 4.1 have been satisfied or waived by the appropriate party (the "Closing
Date"). At the Closing:
(i) Each Purchaser shall deliver, as directed by
the Company, its portion of the purchase price as set forth next to its name on
Schedule I in United States dollars in immediately available funds to an account
or accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser
a certificate evidencing the number of shares of Preferred Stock purchased by
such Purchaser as set forth on Schedule I hereto, the Preferred Stock shall have
the respective rights, preferences, limitations and privileges set forth in
Exhibit A attached hereto, which shall be incorporated into a Certificate of
Designation of Rights, Preferences and Limitations (the "Certificate of
Designation") to be approved by the Purchasers and the Company's Board of
Directors and filed on or before the Closing with the Secretary of State of
Delaware;
(iii) The Company shall deliver to each Purchaser
a Warrant, in the form of Exhibit B hereto, representing the right to acquire
the number of shares of Common Stock purchased by such Purchaser as set forth on
Schedule I hereto; and
(iv) The parties shall execute and deliver each
of the documents referred to in Section 4.1.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. Except as set forth on Schedule 2.1(a), the Company has no
subsidiaries (collectively, the "Subsidiaries"). Each of the Subsidiaries (which
for purposes of this Agreement means any entity in which the Company, directly
or indirectly, owns the majority of such entity's capital stock or holds an
equivalent equity or similar interest) is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Except as set forth on Schedule 2.1(a), each of the
Company and the Subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (x)
adversely affect the legality, validity or enforceability of any of this
Agreement or the Transaction Documents (as defined in Section 2.1(b)) or any of
the transactions contemplated hereby or thereby, (y) have or result in a
material adverse effect on the results of operations, assets, prospects, or
financial condition of the Company and its Subsidiaries, taken as a whole or (z)
materially impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect"). The Company has furnished to each of the Purchasers
true and correct copies of the Company's Certificate of Incorporation, as
amended and as in effect on the date hereof (the "Certificate of
Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the
"Bylaws").
b. Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by this Agreement, the Certificate of Designation, the
Warrants and the Registration Rights Agreement (collectively, the "Transaction
Documents"), and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of each of this Agreement and the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action by the Company. Each of this Agreement and the
Transaction Documents has been duly executed by the Company and when delivered
in accordance with the terms hereof will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except that rights to
indemnification and contribution may be limited by Federal or state securities
laws or public policy relating thereto.
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c. Capitalization. As of the date hereof, the authorized
capital stock of the Company is as set forth in Schedule 2.1(c). All of such
outstanding shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration provisions of the Securities Act, or pursuant
to valid exemptions therefrom. Except as disclosed in Schedule 2.1(c) or the SEC
Documents (as defined in Section 2.1(k), (i) no shares of the Company's capital
stock are subject to preemptive rights nor is any holder of the Common Stock
entitled to preemptive or similar rights arising out of any agreement or
understanding with the Company by virtue of any Transaction Document, as defined
in Section 2.1(b) above, (ii) there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iii) there are no agreements or
arrangements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of their securities under the Securities Act (except
the Registration Rights Agreement), (iv) there are no outstanding securities of
the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (v) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the shares of Common Stock as
described in this Agreement and (vi) except as specifically disclosed in the SEC
Documents), to the Company's knowledge, no Person (as defined below) or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock.
"Person" means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
d. Authorization and Validity; Issuance of Shares. The
shares of Common Stock issuable upon conversion of the Preferred Stock (the
"Conversion Shares") and exercise of the Warrants (the "Warrant Shares", and
together with the Conversion Shares the "Underlying Shares") are and will at all
times hereafter continue to be duly authorized and reserved for issuance and
will be validly issued, fully paid and non-assessable, free and clear of all
liens, encumbrances and Company rights of first refusal, other than liens and
encumbrances created by the Purchasers (collectively, "Liens") and will not be
subject to any preemptive or similar rights other than as granted pursuant to
the Transaction Documents.
e. No Conflicts. The execution, delivery and performance
of this Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not (i)
conflict with or violate any provision of the Certificate of
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Incorporation, Bylaws or other organizational documents of the Company, except
where such conflict or violation has not resulted or would not reasonably
result, individually or in the aggregate, in a Material Adverse Effect, (ii)
subject to obtaining the consents referred to in Section 2.1(f), conflict with,
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument (evidencing a Company or Subsidiary debt or
otherwise) to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, except
where such conflict or violation has not resulted or would not reasonably
result, individually or in the aggregate, in a Material Adverse Effect, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or any Subsidiary is subject (including Federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries, or by which any material property or asset
of the Company or any Subsidiary is bound or affected, except where such
conflict has not resulted or would not reasonably result, individually or in the
aggregate, in a Material Adverse Effect.
f. Consents and Approvals. Except as specifically set
forth on Schedule 2.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority, regulatory or self regulatory agency, or other
Person in connection with the execution, delivery and performance by the Company
of this Agreement or the Transaction Documents, other than (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to the Nasdaq National
Market ("Nasdaq") for the listing of the Underlying Shares with Nasdaq (and with
any other national securities exchange or market on which the Common Stock is
then listed), and (iii) any filings, notices or registrations under applicable
state securities laws (together with the consents, waivers, authorizations,
orders, notices and filings referred to on Schedule 2.1(f), the "Required
Approvals"), except where failure to do so has not resulted or would not
reasonably result, individually, or in the aggregate, in a Material Adverse
Effect.
g. Litigation; Proceedings. Except as specifically set
forth on Schedule 2.1(g) or in the SEC Documents, there is no action, suit,
notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any of this Agreement or the Transaction
Documents or (ii) would reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
h. No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
other credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound and which is required to
be included as an exhibit to any SEC Document (as defined in Section 2.1(k)) or
will be required to be included as an exhibit to the Company's next filing under
either
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the Securities Act or Exchange Act (ii) is in violation of any order of any
court, arbitrator or governmental body applicable to it, (iii) is in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, (iv) is in default under or in violation of its Certificate of
Incorporation, Bylaws or other organizational documents, respectively in each
case, except where such violations have not resulted or would not reasonably
result, individually or in the aggregate, in a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance, rule or regulation of any
governmental entity, except where such violations have not resulted or would not
reasonably result, individually or in the aggregate, in a Material Adverse
Effect.
i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the Transaction Documents hereby
contained, contains, or will contain at the time it was or is so furnished any
untrue statement of a material fact or omitted, omits or will omit at such time
to state any material fact necessary in order to make the statements made herein
and therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed on Schedule 2.1(i) or in SEC Documents filed on
XXXXX, since December 31, 1999, there has been no material adverse change and no
material adverse development in the business, properties, operations, financial
condition, liabilities or results of operations or, insofar as can reasonably be
foreseen, prospects of the Company or the Subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
Subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
j. Private Offering. The Company and all Persons acting
on its behalf have not made, directly or indirectly, and will not make, offers
or sales of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Preferred Stock, the
Warrants or the Underlying Shares or the issuance of such securities under the
Securities Act. Subject to the accuracy and completeness of the representations
and warranties of the respective Purchasers contained in Section 2.2, the offer,
sale and issuance by the Company to the Purchasers of the Preferred Stock, the
Warrants and the Underlying Shares is exempt from the registration requirements
of the Securities Act.
k. SEC Documents; Financial Statements. The Common Stock
of the Company is registered pursuant to Section 12(g) of the Exchange Act.
Except as disclosed on Schedule 2.1(k), since December 31, 1999, the Company has
filed all reports, schedules, forms, statements and other documents required to
be filed by it, with the Commission, pursuant to Section 13, 14 or 15(d) of the
Exchange Act (the foregoing materials and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits to
such documents) incorporated by reference therein being collectively referred to
herein as the "SEC Documents"), on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All agreements to
which the Company or any Subsidiary is a party or to which the property or
assets of the Company or any Subsidiary are subject and which are required to be
filed as exhibits to the SEC Documents have been filed as exhibits to the SEC
Documents as required. As of their respective dates, the financial statements of
the Company included in the SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial year-end
audit adjustments. Neither the Company nor any of its Subsidiaries or any of
their officers, directors, employees or agents have provided the Purchasers with
any material, nonpublic information without first identifying to the Purchasers
that they were receiving material, nonpublic information. The Company
acknowledges that the Purchasers will be trading in the securities of the
Company in reliance on the foregoing representation and warranty.
l. Investment Company. The Company is not, and is not
controlled by or under common control with an affiliate (an "Affiliate") of an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
m. Broker's Fees. No fees or commissions or similar
payments with respect to the transactions contemplated by this Agreement or the
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(m). The Purchasers shall have no obligation with respect
to any fees or with respect to any claims made by or on behalf of other Persons
for fees of a type contemplated in this Section 2.1(m) that may be due in
connection with the transactions contemplated by this Agreement and the
Transaction Documents.
n. [Intentionally omitted.]
o. Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is Nasdaq. Except
as disclosed on Schedule 2.1(o), the Company has not since December 31, 1999
received notice (written or oral) from Nasdaq (or any stock exchange, market or
trading facility on which the Common Stock is or has been listed (or on which it
has been quoted)) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such market or exchange. After giving
effect to the transactions contemplated by this Agreement and the Transaction
Documents, the Company is and will be in compliance with all such maintenance
requirements.
p. Intellectual Property Rights. The Company and each of
its Subsidiaries own or possess adequate rights or licenses to use all
trademarks, trademark applications, trade names and service marks, whether or
not registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights (collectively, "Intellectual Property Rights") which are
necessary for use in
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connection with their respective businesses as now conducted and as described in
the SEC Documents. Except as set forth on Schedule 2.1(p), none of the Company's
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within two years from the date of this Agreement. To the
Company's knowledge, neither the Company nor any of its Subsidiaries has
infringed or is infringing on any of the Intellectual Property Rights of any
Person and, except as set forth on Schedule 2.1(p), there is no claim, action or
proceeding which has been made or brought against, or to the Company's
knowledge, is being made, brought or threatened against, the Company or its
Subsidiaries regarding the infringement of any of the Intellectual Property
Rights, and the Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing, except where any of
the foregoing would not have a Material Adverse Effect. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
q. Internal Accounting Controls. The Company and its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
r. Transactions With Affiliates. Except as set forth on
Schedule 2.1(c) or Schedule 2.1(r), none of the executive officers or directors
of the Company is presently a party to any transaction with the Company or any
of its Subsidiaries (other than for services as executive officers and
directors) involving an amount in excess of $60,000, including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or entity in which
any officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
s. Application to Takeover Protection. The Company and
its Board of Directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation or Bylaws
which is or could become applicable to the Purchasers or the Transaction
Documents as a result of the purchase of the Preferred Stock and the Warrants
pursuant to this Agreement. None of the transactions contemplated by this
Agreement or the Transaction Documents, including the conversion of the Shares
of Preferred Stock and the exercise of the Warrants, will trigger any poison
pill provisions of any of the Company's stockholders' rights or similar
agreements.
t. Acknowledgement Regarding Purchasers' Purchase of
Preferred Stock. The Company further acknowledges that no Purchaser is acting as
a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions
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contemplated hereby and any statement made by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Purchasers' purchase of the securities. The Company further
represents to each Purchaser that the Company's decision to enter into this
Agreement has been based solely on the independent evaluation of the Company and
its representatives.
u. Seniority; Exclusivity. No class of equity securities
of the Company will be senior to the Preferred Stock in right of payment,
whether upon liquidation, dissolution or otherwise. So long as any Preferred
Stock issued hereunder remains outstanding, the Company shall not exchange,
redeem or convert any of the Company's capital stock for indebtedness, including
convertible debt, of the Company. The Company shall not issue and sell any
shares of Preferred Stock, other than to the Purchasers pursuant to this
Agreement, without the prior written consent of each of the Purchasers.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a
corporation or a limited duration company or a limited liability company or
limited partnership duly formed, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation with the requisite
power and authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the shares of Preferred Stock and the Warrants hereunder has been
duly authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the
shares of Preferred Stock, the Warrants and the Underlying Shares for its own
account and not with a present view to or for distributing or reselling the
shares of Preferred Stock, the Warrants, the Conversion Shares or the Warrant
Shares or any part thereof or interest therein in violation of the Securities
Act; provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the shares of Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares for any minimum or other
specific term and reserves the right to dispose of the shares of Preferred Stock
at any time in accordance with or pursuant to a registration statement or an
exemption under the Securities Act.
c. Purchaser Status. At the time such Purchaser was
offered the Preferred Stock and the Warrants, and at the Closing Date and each
date such Purchaser exercises Warrants, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such
Purchaser, either alone or together with its representatives, had and will have
such
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knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Preferred Stock, the Warrants and the Common Stock.
d. Reliance. Such Purchaser understands and acknowledges
that (i) the Preferred Stock, the Warrants and the Underlying Shares are being
offered and sold to such Purchaser without registration under the Securities Act
in a private placement that is exempt from the registration provisions of the
Securities Act under Section 4(2) of the Securities Act or Regulation D
promulgated thereunder and (ii) the availability of such exemption depends in
part on, and the Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby consents
to such reliance.
e. Information. Such Purchaser and its advisors, if any,
have been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of the
Preferred Stock and Warrants which have been requested by such Purchaser or its
advisors. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigation conducted by Purchaser or any of its advisors
or representatives shall modify, amend or affect Purchaser's right to rely on
the Company's representations and warranties contained in Section 2.1 above or
representations and warranties of the Company contained in any other Transaction
Document. Such Purchaser understands that its investment in the Preferred Stock
and Warrants involves a significant degree of risk.
f. Governmental Review. Such Purchaser understands that
no United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Preferred Stock or Warrants.
g. Residency. Such Purchaser is a resident of the
jurisdiction set forth immediately below such Purchaser's name on Schedule II
hereto.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares held
by it, such Purchaser understands and agrees that it may do so only pursuant to
an effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from the registration requirements of the
Securities Act or Rule 144 promulgated under the Securities Act ("Rule 144"). In
connection with any transfer of any Preferred Stock, Warrants, Conversion Shares
or Warrant Shares other than pursuant to an effective registration statement,
Rule 144 or to the
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Company, the Company may require the transferor thereof to provide to the
Company a written opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be customary for opinions of counsel in comparable transactions
and reasonably acceptable to the Company, to the effect that such transfer does
not require registration of such transferred securities under the Securities
Act; provided, however, that if the Preferred Stock, Warrants, Conversion Shares
or Warrant Shares may be sold pursuant to Rule 144(k), no written opinion of
counsel shall be required from the Purchaser if such Purchaser provides
reasonable assurances that such security can be sold pursuant to Rule 144(k).
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer by any Purchaser to an Affiliate (as defined in the
Certificate of Designation) of such Purchaser, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Purchaser
under this Agreement and the Transaction Documents. If a Purchaser provides the
Company with an opinion of counsel, the form and substance of which opinion
shall be customary for opinions of counsel in comparable transactions and
reasonably acceptable to the Company, to the effect that a public sale,
assignment or transfer of the Preferred Stock, the Conversion Shares, the
Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Warrants, the Conversion Shares and the Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Conversion Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. Notwithstanding the foregoing or
anything else contained herein to the contrary, the securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
b. Each Purchaser agrees to the imprinting, so long as
is required by this Section 3.1(b), of the following legend on the Preferred
Stock, the Warrants, the Conversion Shares and the Warrant Shares:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
Neither the Preferred Stock, the Warrants, the Conversion
Shares, nor the Warrant Shares shall contain the legend set forth above (or any
other legend) (i) if in the written opinion of counsel to the Company
experienced in the area of United States securities laws such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) or
(ii) if such
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Preferred Stock, Warrants, Conversion Shares or Warrant Shares may be sold
pursuant to Rule 144(k). The Company agrees that it will provide each Purchaser,
upon request, with a certificate or certificates representing shares of
Preferred Stock, Warrants, Conversion Shares or Warrant Shares, free from such
legend at such time as such legend is no longer required hereunder. If such
certificate or certificates had previously been issued with such a legend or any
other legend, the Company shall, upon request and upon the delivery of the
legended certificate(s), reissue such certificate or certificates free of any
legend.
3.2 Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
Preferred Stock, the Warrants, the Conversion Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12 of the Exchange Act or subject to Section 15(d) of the Exchange
Act, will timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the date hereof pursuant to Section 13, 14 or 15(d) of the Exchange Act
and will not take any action or file any document (whether or not permitted by
the Exchange Act or the rules thereunder) to terminate or suspend such reporting
and filing obligations. As long as any Purchaser owns the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act,
it will prepare and furnish to the Purchasers and make publicly available in
accordance with Rule 144(c) promulgated under the Securities Act annual and
quarterly financial statements, together with a discussion and analysis of such
financial statements in form and substance substantially similar to those that
would otherwise be required to be included in reports required by Section 13(a)
or 15(d) of the Exchange Act, as well as any other information required thereby,
in the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as the holders of a majority of the Preferred Stock, the
Warrants, the Conversion Shares or the Warrant Shares may reasonably request,
all to the extent required from time to time to enable such Person to sell the
Preferred Stock, the Warrants, the Conversion Shares, or the Warrant Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in Section 3.1(b). Upon the request of any
such Person, the Company shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Preferred Stock, the Warrants, the Conversion Shares or the
Warrant Shares in a manner that would require the registration under the
Securities Act of the sale of the Preferred Stock, the Warrants, the Conversion
Shares or the Warrant Shares to any Purchaser, or to issue securities in such
circumstances that is likely to result in such offering being integrated with
the sale of the Preferred Stock, Warrants and Underlying Shares in such manner
that stockholder approval would be required pursuant to any stockholder approval
provision applicable to the Company or its securities.
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3.5 Listing and Reservation of Conversion Shares and Warrant
Shares.
a. The Company shall (i) not later than ten (10)
business days after the Closing Date prepare and file with Nasdaq (as well as
any other national securities exchange or market on which the Common Stock is
then listed) additional shares listing applications or letters acceptable to
Nasdaq covering and listing a number of shares of Common Stock which is at least
equal to 100% the maximum number of Underlying Shares then issuable, assuming
that the payment of all future dividends on such shares then outstanding were
made in shares of Common Stock, (ii) take all steps necessary to cause the
Underlying Shares to be approved for listing on Nasdaq (as well as on any other
national securities exchange or market on which the Common Stock is then listed)
as soon as possible thereafter, (iii) maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all such Underlying Shares, and
(iv) provide to the Purchasers evidence of such listing. Prior to the
effectiveness of the Registration Statement, the Company shall promptly provide
to each Purchaser copies of any notices it receives from Nasdaq regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3.5(a).
b. The Company at all times shall reserve a sufficient
number of shares of its authorized but unissued Common Stock to provide for the
full conversion of the outstanding shares of Preferred Stock and exercise of the
outstanding Warrants. Shares of Common Stock reserved for issuance upon
conversion of the shares of Preferred Stock and the exercise of the Warrants
shall be allocated pro rata to each of the Purchasers in accordance with the
number of shares of Preferred Stock and Warrants issued and delivered to such
Purchaser at the Closing. If at any time the number of shares of Common Stock
authorized and reserved for issuance is insufficient to cover 100% of the number
of Conversion Shares and Warrant Shares issued and issuable upon conversion of
the shares of Preferred Stock and exercise of the Warrants (based on the
Conversion Price (as defined in the Certificate of Designation) of the shares of
Preferred Stock in effect from time to time and the Exercise Price (as defined
in the Warrants) of the Warrants in effect from time to time) without regard to
any limitation on conversions or exercises, the Company will promptly take all
corporate action necessary to authorize and reserve 100% of such shares pursuant
to Section 3(b) of the Registration Rights Agreement, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 3.5(b), in the case
of an insufficient number of authorized shares, and using best efforts to obtain
stockholder approval of an increase in such authorized number of shares.
3.6 Notice of Breaches.
a. Prior to the effectiveness of the Registration
Statement, the Company and each Purchaser shall give prompt written notice to
the other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents, as well as any
events or occurrences arising after the date hereof and prior to the Closing
Date, which would reasonably be likely to cause any representation or warranty
or other agreement of such party, as the case may be, contained herein to be
incorrect or breached as of the Closing Date. However, no disclosure by either
party pursuant to this Section 3.6 shall be
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deemed to cure any breach of any representation, warranty or other agreement
contained herein or in the Transaction Documents.
b. Notwithstanding the generality of Section 3.6(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company or any Subsidiary to the
effect that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its
obligations, representations or warranties under this Agreement or the
Transaction Documents shall not be imputed to, and shall have no effect upon,
any other Purchaser or affect the Company's obligations under this Agreement or
any Transaction Document to any non-defaulting Purchaser, except as expressly
provided in the Transaction Documents or to the extent an obligation of the
Company can not reasonably be met as a result of a default by a Purchaser.
3.7 Form D. The Company agrees to file a Form D with respect to
the Preferred Stock and Warrants as required by Rule 506 under Regulation D and
to provide a copy thereof to each Purchaser promptly after such filing.
3.8 Future Financings.
a. As long as shares of the Preferred Stock are
outstanding, except for (i) issuance of the Underlying Shares; (ii) shares of
Common Stock deemed to have been issued by the Company in connection with any
plan which has been approved by the Board of Directors of the Company, pursuant
to which the Company's securities may be issued to any employee, officer,
director or consultant of the Company; (iii) shares of Common Stock issuable
upon the exercise of any options or warrants outstanding on the date hereof and
listed in Schedule 2.1(c) hereto; (iv) the securities to be issued in the
transactions set forth on such Schedule 2.1(c); (v) shares issued in a
transaction registered under the Securities Act; (vi) shares of Common Stock
issued or deemed to have been issued as consideration for an acquisition by the
Company of a division, assets or business (or stock constituting any portion
thereof) from another Person or (vii) shares of Common Stock issued upon
conversion of the Series A Preferred Stock (collectively, the "Excluded
Security"), if the Company agrees to issue shares of Common Stock or other
securities convertible into or exchangeable or exercisable for Common Stock (the
"New Security") while any shares of Preferred Stock are outstanding at an
effective price per share which is less (including, without limitation, any
security which is convertible into or exchangeable or exercisable for Common
Stock at a price which may change with the market price of the Common Stock)
than the Conversion Price (as defined in the Certificate of Designation) of the
shares of Preferred Stock as of the date thereof (a "Down Future Financing"),
the Company shall provide to the Purchasers by 5:00 p.m. (New York time) on or
before the third (3rd) Trading Day (as defined below) after the decision to
issue the New Security has been made, written notice of the Down Future
Financing containing in reasonable detail (i) the proposed terms of the Down
Future Financing, (ii) the amount of the proceeds that will be raised and (iii)
the Person with whom such Down Future Financing shall be effected, and attached
to
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which shall be a term sheet or similar document relating thereto (the "Down
Future Financing Notice"). Upon receiving the Down Future Financing Notice, each
Purchaser shall have the pro rata right (based on the purchase price of the
shares of Preferred Stock held by such Purchaser relative to the aggregate
purchase price of shares of Preferred Stock outstanding) to purchase, on the
same terms as the Down Future Financing, an amount of New Securities (in
addition to the New Securities being issued in the Down Future Financing) having
a purchase price which shall not exceed the lesser of (i) the aggregate purchase
price set forth in Schedule I hereto opposite such Purchaser's name, or (ii) the
aggregate purchase price of the New Securities being issued in the Down Future
Financing. In the event a Purchaser desires to exercise the right granted under
this Section 3.8(a), such Purchaser must notify the Company on or prior to the
fifth (5th) Trading Day after such Purchaser has received the Down Future
Financing Notice. In the event the terms and conditions of a proposed Down
Future Financing are amended in any material respect after delivery of the Down
Future Financing Notice but prior to the closing of the proposed Down Future
Financing to which such Down Future Financing Notice relates, the Company shall
deliver a new notice to each Purchaser describing the amended terms and
conditions of the proposed Down Future Financing and each Purchaser thereafter
shall have an option during the two (2) Trading Days period following delivery
of such new notice to purchase its pro rata share (based on the Purchaser's
percentage of the aggregate purchase price of the outstanding shares of
Preferred Stock such Purchaser owns) of the New Securities being offered on the
same terms as contemplated by such proposed Down Future Financing, as amended,
or to withdraw its election to exercise such right. The foregoing sentence shall
apply to successive amendments to the terms and conditions of any proposed Down
Future Financing. At the closing for such Down Future Financing, the
transactions contemplated by this Section 3.8(a) shall close, subject to the
completion of mutually satisfactory documentation, and the Company shall tender
to each Purchaser certificates representing the New Securities that it agreed to
purchase and the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; provided, however, that
each Purchaser, in lieu of providing cash as consideration for the purchase
price, may retire all or a portion of the outstanding number of and any
dividends owing on the shares of Preferred Stock as payment of the purchase
price for the shares of Common Stock that it desires to purchase pursuant to
this Section 3.8(a). "Trading Day" shall mean a day on which the Nasdaq (or in
the event the Common Stock is not traded on Nasdaq, such other securities market
on which the Common Stock is listed) is open for trading.
b. To the extent that Section 3.8(a) above does not
apply, as long as shares of the Preferred Stock are outstanding, except for any
Excluded Security, if the Company agrees to issue any New Security while any
shares of Preferred Stock are outstanding (a "Future Financing"), the Company
shall provide to the Purchasers by 5:00 p.m. (New York time) on or before the
third (3rd) Trading Day after the decision to issue the New Security has been
made, written notice of the Future Financing containing in reasonable detail (i)
the proposed terms of the Future Financing, (ii) the amount of the proceeds that
will be raised and (iii) the Person with whom such Future Financing shall be
effected, and attached to which shall be a term sheet or similar document
relating thereto (the "Future Financing Notice"). Upon receiving the Future
Financing Notice, each Purchaser shall have the pro rata right (based on its
then current holdings of Preferred Stock) to purchase, on the same terms as the
Future Financing, an amount of New Securities (in addition to the New Securities
being issued in the Future Financing) equal to the product of (x) 12.5%,
multiplied by (y) the ratio of the number of shares of Preferred Stock
outstanding as of the date of the Future Financing Notice to 30,000, multiplied
by the ratio of the
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number of shares of Preferred Stock held by such Purchaser to the number of
shares of Preferred Stock outstanding as of the date of the Future Financing
Notice, provided that in no such case shall the Purchasers' participation right
under this Section 3.8(b) in any particular Future Financing exceed an aggregate
purchase price of $30,000,000. In the event a Purchaser desires to exercise the
right granted under this Section 3.8(b), such Purchaser must notify the Company
on or prior to the fifth (5th) Trading Day after such Purchaser has received the
Future Financing Notice. In the event the terms and conditions of a proposed
Future Financing are amended in any material respect after delivery of the
Future Financing Notice but prior to the closing of the proposed Future
Financing to which such Future Financing Notice relates, the Company shall
deliver a new notice to each Purchaser describing the amended terms and
conditions of the proposed Future Financing and each Purchaser thereafter shall
have an option during the two (2) Trading Days period following delivery of such
new notice to purchase its pro rata share (based on the Purchaser's then current
holdings of Preferred Stock) of the New Securities being offered on the same
terms as contemplated by such proposed Future Financing, as amended, or to
withdraw its election to exercise such right. The foregoing sentence shall apply
to successive amendments to the terms and conditions of any proposed Future
Financing. At the closing for such Future Financing, the transactions
contemplated by this Section 3.8(b) shall close, subject to the completion of
mutually satisfactory documentation, and the Company shall tender to each
Purchaser certificates representing the New Securities that it agreed to
purchase and the Purchasers shall make payment for the entire purchase price in
immediately available funds at the closing of such sale; provided, however, that
each Purchaser, in lieu of providing cash as consideration for the purchase
price, may retire all or a portion of the outstanding number of and any
dividends owing on the shares of Preferred Stock as payment of the purchase
price for the shares of Common Stock that it desires to purchase pursuant to
this Section 3.8(b).
3.9 Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Stock and the exercise of the Warrants to acquire assets,
reduce debt and for working capital.
3.10 Transactions with Affiliates. So long as any Preferred Stock
or Warrants are outstanding, the Company shall not, and shall cause each of its
Subsidiaries or affiliated entities not to, enter into, amend, modify or
supplement, or permit any Subsidiary to enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors or persons who were officers or directors at
any time during the previous two years, stockholders who beneficially own 10% or
more of the Common Stock, or Affiliates or any individual related by blood,
marriage or adoption to any such individual or with any entity in which any such
entity or individual owns a 10% or more beneficial interest (each a "Related
Party"), except for (a) customary employment arrangements and benefit programs
on reasonable terms consistent with prior practice, (b) any agreement,
transaction, commitment or arrangement on an arms-length basis on terms no less
favorable than terms which would have been obtainable from a Person other than
such Related Party, (c) any agreement, transaction, commitment or arrangement
which is approved by a majority of the directors of the Company who have no
material financial interest in the matter or (d) transactions pursuant to the
Transaction Documents. "Affiliate" for purposes of this section only means, with
respect to any person or entity, another person or entity that, directly or
indirectly, (i) has a 20% or more equity interest in that person or entity, (ii)
has 20% or more common ownership with that person or entity, (iii) controls or
is controlled by that person or entity, or (iv) shares common
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control or is under common control with that person or entity. "Control" or
"Controls" for purposes of this section means that a person or entity has the
power, direct or indirect, to conduct or govern the policies of another person
or entity.
3.11 Transfer Agent Instructions. The Company shall issue
irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Conversion
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchaser (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.11, and stop transfer instructions to give effect to Section
3.1 (in the case of the Conversion Shares and the Warrant Shares, prior to
registration of the Conversion Shares under the Securities Act) will be given by
the Company to its transfer agent. If a Purchaser provides the Company with an
opinion of counsel of a law firm with recognized expertise in securities
addressed to the Company, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Preferred Stock, the Conversion
Shares, the Warrants and the Warrant Shares may be made without registration
under the Securities Act or the Purchaser provides the Company with reasonable
assurances that the Warrants, the Conversion Shares and the Warrant Shares can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Conversion Shares
and the Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.11 will be inadequate and agrees,
in the event of a beach or threatened breach by the Company of the provisions of
this Section 3.11, that the Purchasers, shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
3.12 Press Release; Filing of Form 8-K. Subject to the provisions
of Section 6.11, the Company shall issue a press release in form and substance
acceptable to the Purchasers promptly following the Closing.
3.13 Non-public Information Ordinary Course Brokerage and Trading.
Purchasers acknowledge that they may have been provided material non-public
information in connection with the transactions contemplated hereby and that
trading in securities of the Company while in the possession of material
non-public information is prohibited by the federal securities laws. No
Purchaser who is in possession of material non-public information shall trade in
any securities of the Company prior to the third business day after the Company
publicly announces its results of operations for the quarter ended June 30,
2000, or at any time thereafter that such Purchaser is in possession of material
non-public information. Subject to compliance with all
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applicable securities laws, Nasdaq regulations, no Purchaser shall be prohibited
by the Company from engaging in its ordinary course brokerage and trading
activities in respect of the Company's Common Stock; provided that the personnel
engaged in such activities have not been involved with the transactions
contemplated hereby and have not been provided with confidential information
with respect to the Company. No Purchaser shall engage in any trading activity
in the Company's securities in violation of Regulation M under the Exchange Act.
3.14 Best Efforts. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.
3.15 Corporate Existence. Until such time as all of the Purchasers
provide the Company with written notice that they do not beneficially own any
shares of Preferred Stock or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's assets,
except in the event of a merger or consolidation or sale of all or substantially
all of the Company's assets, where the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith and (ii) is a
publicly traded corporation whose common stock is listed for trading on the
Nasdaq, the New York Stock Exchange or the American Stock Exchange.
3.16 No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the redemption of shares of Preferred
Stock otherwise required under this Agreement or the Registration Rights
Agreement would be prohibited by the relevant provisions of the Delaware General
Corporation Law, such redemption shall be effected as soon as it is permitted
under such law; provided, however, that from the fifth (5th) day after such
redemption notice until such redemption price is paid in full, interest on any
such unpaid amount shall accrue and be payable at the rate of 15% per annum in
accordance with the applicable Certificate of Designation.
ARTICLE IV.
CONDITIONS
4.1 Closing.
a. Conditions Precedent to the Obligation of the Company
to Sell the Shares of Preferred Stock and Warrants. The obligation of the
Company to sell the shares of Preferred Stock and Warrants is subject to the
satisfaction or waiver (with prior written notice to each Purchaser) by the
Company, at or before the Closing Date of each of the following conditions:
(i) Accuracy of the Purchasers' Representations
and Warranties. The representations and warranties of each Purchaser in this
Agreement shall be true and correct in all material respects as of the date when
made and as of the Closing;
(ii) Performance by the Purchasers. Each
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or before the
Closing; and
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(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the
Purchasers to Purchase the Shares of Preferred Stock and Warrants at the
Closing. The obligation of each Purchaser hereunder to acquire and pay for the
shares of Preferred Stock and Warrants at the Closing is subject to the
satisfaction or waiver by such Purchaser, at or before the Closing Date, of each
of the following conditions:
(i) Accuracy of the Company's Representations
and Warranties. The representations and warranties of the Company set forth in
this Agreement and in the Registration Rights Agreement shall be true and
correct in all respects as of the date when made and as of the Closing Date;
(ii) Performance by the Company. The Company
shall have performed, satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or before the Closing Date;
(iii) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by the Commission,
on Nasdaq (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);
(v) Listing of Common Stock. The Common Stock
shall have been at all times since the date of this Agreement and on the Closing
Date listed for trading on the Nasdaq;
(vi) Required Approvals. All Required Approvals
shall have been obtained and copies thereof delivered to the Purchasers other
than those relating solely to Closing Dates other than the Closing Date;
(vii) Required Filing. The Company shall have
filed the Certificate of Designation with the Secretary of State of Delaware and
it shall have become effective;
(viii) Shares of Common Stock. The Company shall
have duly reserved the number of Underlying Shares issuable upon the exercise of
the Warrants or the conversion of the shares of Preferred Stock acquired by the
Purchaser on the Closing Date;
(ix) Adverse Changes. Since the date of the
financial statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K,
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whichever is more recent, last filed prior to the date of this Agreement, no
event which had a Material Adverse Effect shall have occurred (for purposes
hereof, changes in the market price of the Common Stock as compared to the
market generally may be considered as a factor in determining whether there has
occurred an event which has had a Material Adverse Effect);
(x) Litigation. No litigation shall have been
instituted or threatened against the Company which would reasonably be expected
to, individually or in the aggregate, have had a Material Adverse Effect;
(xi) Change of Control. No Change of Control
shall have occurred between the date hereof and the Closing Date. "Change of
Control" means the occurrence of any of (i) an acquisition after the date hereof
by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of their
Affiliates, of in excess of 25% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's Board of
Directors that is not approved by those individuals who are members of the Board
of Directors on the date hereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, (iv) the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (v) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), (iii) or (iv);
(xii) Transfer Agent Instructions. The Irrevocable
Transfer Agent Instructions, in a form acceptable to the Purchasers, shall have
been delivered to and acknowledged in writing by the Company's transfer agent
with a copy forwarded to each Purchaser;
c. Documents and Certificates. At the Closing, the
Company shall have delivered to the Purchasers, the following in form and
substance reasonably satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal
counsel in the form attached hereto as Exhibit D dated as of the Closing Date;
(ii) Preferred Stock Certificate. A Preferred
Stock Certificate(s) representing the number of shares of Preferred Stock
purchased by such Purchaser as set forth next to such Purchaser's name on
Schedule I, registered in the name of such Purchaser, each in form satisfactory
to the Purchaser;
(iii) Warrant. A Warrant(s) representing the
Warrants purchased by such Purchaser as set forth next to such Purchaser's name
on Schedule I, registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have
executed and delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's
Certificate dated the Closing Date and signed by an executive officer of the
Company confirming the accuracy of the
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Company's representations and warranties as of such Closing Date and confirming
the compliance by the Company with the conditions precedent set forth in this
Section 4.1(c) as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's
Certificate dated the Closing Date and signed by the Secretary or Assistant
Secretary of the Company certifying (A) that attached thereto is a true and
complete copy of the Certificate of Incorporation of the Company, as in effect
on the Closing Date, (B) that attached thereto is a true and complete copy of
the by-laws of the Company, as in effect on the Closing Date and (C) that
attached thereto is a true and complete copy of the Resolutions duly adopted by
the Board of Directors of the Company authorizing the execution, delivery and
performance of this Agreement and of the Transaction Documents, and that such
Resolutions have not been modified, rescinded or revoked;
(vii) Certificates of Incorporation. The Company
shall have delivered to each of the Purchasers a copy of a certificate
evidencing the incorporation and good standing of the Company as of a date
within ten days of the Closing Date. The Company shall have delivered to the
Purchasers a copy of its Certificate of Incorporation as certified by the
Secretary of State of the State of Delaware within ten days of the Closing Date;
(viii) Transfer Agent Letter. The Company shall
have delivered to each Purchaser a letter from the Company's transfer agent
certifying the number of shares of Common Stock outstanding as of a date within
five days of the Closing Date; and
(ix) Other Documents. The Company shall have
delivered to each Purchaser such other documents relating to the transactions
contemplated by the Transaction Documents as the Purchasers or its counsel may
reasonably request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. Except to the extent that matters which could
be covered by this Section 5 are covered by Section 5 of the Registration Rights
Agreement, in consideration of the Purchasers execution and delivery of this
Agreement and the Transaction Documents and acquiring the Preferred Stock,
Conversion Shares, Warrants and Warrant Shares thereunder and in addition to all
of the Company's other obligations under this Agreement and the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless each
Purchaser, its past and present Affiliates and their successors and assigns (in
accordance with the provisions of Section 6.6), each other holder of the
Underlying Shares and all of their stockholders, officers, directors, employees,
members, partners and managers and direct or indirect investors and any of the
foregoing Person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnities") from and against any and all
actions, causes of action, suits, claims, losses, proceedings, costs (as
incurred), penalties, fees (including legal fees and expenses), liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnity is a party to the action for which indemnification hereunder is
sought), and including interest, penalties and attorneys' fees and disbursements
(the "Indemnified Liabilities"), incurred by any
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Indemnity as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the Transaction Documents, or any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in this
Agreement or the Transaction Documents, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any cause of action, suit or
claim brought or made, other than by the Company, against such Indemnity and
arising out of or resulting from (i) the execution, delivery, performance or
enforcement of this Agreement or the Transaction Documents, (ii) any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Preferred Stock or Warrants or (iii) solely the
status of such Purchasers or holder of the Preferred Stock, the Conversion
Shares, the Warrants or the Warrant Shares as an investor in the Company;
provided however, that the Company shall not be required to provide
indemnification for any losses, claims, damages, liabilities or expenses arising
out of the gross negligence or willful misconduct of a Purchaser. The
indemnification obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and
partners, directors, agents, employees and controlling Persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling Persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
this Agreement or any of the Transaction Documents except to the extent for any
losses, claims, damages, liabilities or expenses incurred by the Company result
from the gross negligence or willful misconduct of such Purchaser or entity in
connection with the transactions contemplated by this Agreement or the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits
and Schedules hereto and the Transaction Documents contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
6.2 Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party (if received by 5:00 p.m.
eastern time ("ET") where such notice is received) or the first business day
following such delivery (if received after 5:00 p.m. ET where such notice is
received); or (iii) one business day after deposit with a nationally
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recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Xxxxx 0 Systems, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxxx
With a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxx or Xxxxx Xxxxxxxxxx
If to Xxxxx Xxxxxxx Partners I, Ltd. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
With a copy, in the case of Notice to Xxxxx Xxxxxxx Partners
I, Ltd. to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
If to Seneca Capital, L.P., to:
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c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxx
If to Seneca Capital International, Ltd., to:
c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx. Xxxxx Xxxx
With a copy, in the case of Notice to Seneca Capital, L.P. or
Seneca Capital International, Ltd., to:
Xxxxxx Xxxxx Xxxxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Notwithstanding
the foregoing, no such amendment shall be effective to the extent that it
applies to less than all of the holders of the shares of Preferred Stock
outstanding. The Company shall not offer or pay any consideration to a Purchaser
for consenting to such an amendment or waiver unless the same consideration is
offered to each Purchaser and the same consideration is paid to each Purchaser
which consents to such amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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6.5 References. References herein to Sections are to Sections of
this Agreement, unless otherwise expressly provided.
6.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Purchasers. The
Purchasers may assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company, provided, that any assignees
must execute and deliver to the company an instrument expressly making the
representations and warranties set forth in Section 2.2 and agrees to become a
party hereto; further that, prior to the Closing Date, the Purchasers may assign
this Agreement its rights and rights or obligations hereunder only to an
Affiliate of such Purchaser. This provision shall not limit a Purchaser's right
to transfer securities in accordance with all of the terms of this Agreement or
the Transaction Documents.
6.7 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the nonexclusive jurisdiction of the state and
federal courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.9 Survival. The representations and warranties of the Company
and the Purchasers contained in Sections 2.1 and 2.2, the agreements and
covenants set forth in Section 3, and the indemnification provisions set forth
in Section 5, shall survive the Closing and any conversion of the shares of
Preferred Stock or exercise of the Warrants regardless of any investigation made
by or on behalf of the such Purchaser or by or on behalf of the Company, except
that, in the case of representations and warranties such survival shall be
limited to the period of four (4) years following the Closing Date on which they
were made or deemed to have been made (other than with respect to any claim by a
third party against the party to this Agreement who seeks to assert a claim
based on such representations and warranties). This section shall have no effect
on the survival of the indemnification provisions of the Registration Rights
Agreement.
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6.10 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.11 Publicity. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
with respect to the transactions contemplated hereby and neither party shall
issue any such press release or otherwise make any such public statement without
the prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior consent, except to the extent required by
law and in the initial press release with respect to the transactions
contemplated hereby. The Purchasers and their affiliated companies shall,
without further cost, have the right to use in its advertising, marketing or
other similar materials all or parts of the Company's press releases that focus
on the Transaction forming the subject matter of this Agreement or which make
reference to the Transaction. The Purchasers understand that this grant by the
Company only waives objections that the Company might have to the use of such
materials by the Purchasers and in no way constitutes a representation by the
Company that references in such materials to the activities of third-parties
have been cleared or constitute a fair use.
6.12 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
6.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Purchasers (severally and not jointly) agree that monetary damages would not
be adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
6.14 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other
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agreement or document delivered at any closing, and no action taken by any
Purchaser pursuant hereto or thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement. Each Purchaser shall be entitled to protect and enforce its
rights, including without limitation the rights arising out of this Agreement or
out of the Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
6.15 Payment Set Aside. To the extent that the Company makes a
payment or payments to the Purchasers hereunder or pursuant to the Transaction
Documents or the Purchasers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.
6.16 Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.17 Fees and Expenses. Except as set forth in the Registration
Rights Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall pay
Xxxxx Xxxxxxx Partners I, Ltd. an aggregate fee of $30,000 at the Closing and
shall reimburse Seneca Capital, L.P. and Seneca Capital International, Ltd. at
the Closing for the reasonable fees and expenses of their counsel, auditors and
any consultants ("Seneca Expenses") in an amount up to $10,000.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized persons as
of the date first indicated above.
XXXXX 0 SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxxxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxxxxxxx
Title: President
XXXXX XXXXXXX PARTNERS I, LTD.
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Attorney-in-Fact
SENECA CAPITAL, L.P.
By: Seneca Capital Advisors, LLC, its
general partner
By: /s/ Xxxx Xxxxxx
-------------------------------
Name: Xxxx Xxxxxx
Title: Managing Partner
SENECA CAPITAL INTERNATIONAL, LTD.
By: /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
Title: Managing Partner
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SCHEDULE I
Number of shares
of Preferred Stock Number of Shares
Name of Purchaser at Closing Date Underlying Warrants
----------------- ------------------ -------------------
Xxxxx Xxxxxxx Partners I, Ltd. 15,000 523,691
Seneca Capital, L.P. 5,228 182,506
Seneca Capital International, Ltd. 9,772 341,185
TOTAL 30,000 1,047,382
30
SCHEDULE II
Name of Purchaser Address
----------------- -------
Xxxxx Xxxxxxx Partners I, Ltd. 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
Residence: Grand Cayman, Cayman Islands
Seneca Capital, L.P. c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx Xxxx
Fax: (000) 000-0000
Residence:
Seneca Capital International, Ltd.: c/o Seneca Capital Advisors, LLC
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx Xxxx
Fax: (000) 000-0000
Residence:
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Exhibit A
[Form of Certificate of Designation]
32
Exhibit B
[Form of Warrant]
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Exhibit C
[Registration Rights Agreement]
34
Exhibit D
[Company's Legal Opinion]
1. Each of the Company(1) and its Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to
carry on its business as currently conducted. The Company has no
subsidiaries other than the Subsidiaries. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary.
2. The Company has the requisite corporate power and authority to enter
into and consummate the transactions contemplated by each of the
Transaction Documents(2) and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action
on the part of the Company. Each of the Transaction Documents has been
duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
3. The execution, delivery and performance of the Transaction Documents by
the Company and the consummation by the Company of the transactions
contemplated by such agreements do not and will not (i) conflict with
or violate any provision of its Certificate of Incorporation or Bylaws,
(ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the
Company is a party and which is required to be included as an exhibit
to the SEC Documents (as defined herein), or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction,
decree or other restrictions of any court or governmental authority to
which the Company is subject (including Federal and state securities
laws and regulations), or by which any property or asset of the Company
is bound or affected. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority.
---------------
(1) The opinion letter should state that capitalized terms not otherwise defined
have the meanings assigned to them in the Purchase Agreement.
(2) The term Transaction Documents means the Purchase Agreement, the
Registration Rights Agreement, Certificate of Designation and the Warrants.
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4. Neither the Company nor any Subsidiary is required to obtain any
consent, waiver, authorization or order of, give any notice to, or make
any filing or registration with, any court or other Federal, state,
local or other governmental authority or other person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents. Based on the representations and warranties of
the Company set forth in Section 2.1 of the Purchase Agreement and
assuming the accuracy of the representations and warranties of the
Purchasers set forth in Section 2.2 of the Purchase Agreement, the
offer, issuance and sale of the shares of Preferred Stock and the
Warrants to the Purchasers pursuant to the Purchase Agreement and the
Warrant are exempt from the registration requirements of the Securities
Act.
5. To my knowledge, the Company has filed all reports required to be filed
by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (the "SEC
Documents") on a timely basis. As of their respective dates, the SEC
Documents complied in all material respects as to form with the
requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder.
6. There is no pending or threatened action, suit or proceeding before any
court or governmental agency, authority or body or any arbitrator
involving the Company or any of its Subsidiaries which, if adversely
decided, could reasonably be expected to have a material adverse effect
on the issuance of the shares of Preferred Stock or the Conversion
Shares, or the issuance or exercise of the Warrants or Warrant Shares,
or the consummation of the transactions contemplated by the Transaction
Documents.
7. All of the Company's issued and outstanding capital stock has been duly
authorized, validly issued and is fully paid and non-assessable as of
the date hereof.
8. The Company has full corporate power and authority to issue, sell and
deliver the Preferred Stock, Conversion Shares, Warrants and Warrant
Shares pursuant to the Transaction Documents.
9. The Company has duly authorized and reserved for issuance such number
of shares of Common Stock as are issuable upon conversion of the shares
of Preferred Stock and exercise of the Warrants (the "Underlying
Shares") in accordance with the terms of the Certificate of Designation
and the Warrants. When issued by the Company in accordance with the
terms of the Certificate of Designation and the Warrants, the
Underlying Shares will be validly issued, fully paid and
non-assessable.
2
